EU and MERCOSUR Conclude Trade Agreement But Gives Rise to Sustainability Worries

19-07-2019

On 28 June 2019, the European Union and Mercosur countries Argentina, Brazil, Paraguay and Uruguay concluded longstanding negotiations on a landmark trade agreement. Venezuela is not covered by the agreement but has the possibility to join later.

The agreement will cover almost 800 million consumers and becomes the first deep trade agreement that MERCOSUR as a bloc has concluded. The agreement proposes to remove duties on 91% of EU exports to Mercosur and liberalize 92% of Mercosur exports to the EU over a transition period of up to 10 years for most products. For more sensitive products on the side of the EU not fully liberalized, partial liberalization commitments such as tariff-rate quotas will apply.

Market opening

The agreement will make it easier for amfori members to export EU agricultural products like wine, dairy and confectionery to the above-mentioned Mercosur countries.

On the other hand, members will find it easier to import from Mercosur into the EU certain agri-food products, including fruits, instant coffee and orange juice. The deal cuts tariffs to zero upon entry into force for several agricultural products such as soy and corn oils, edible meat offal, certain fruits and vegetables, dried fruits, and certain seafood. Some sensitive products for the EU such as poultry, beef, pig meat, ethanol, and sugar will have better access through improved tariff-rate quotas (A tariff-rate quota allows certain quantities of a product to enter a market at a lower tariff rate. Once this amount has been met, all product entering above the quota will have a higher tariff placed on them).

Sustainability worries

Certain politicians and NGOs from both sides raised their concerns that the trade agreement will adversely affect their local farming communities, deforestation in South America and reduce sovereignty on deciding on labour standards.

It is important for the EU and Mercosur to take these worries into consideration and make sure that they use the tools provided by the agreement (such as the dispute resolution mechanism, Domestic Advisory Groups and civil society dialogues) to address any challenges that may arise.

amfori position

amfori welcomes the deal due to the vast economic benefits that it will provide for our members and the abovementioned platforms that it will create for driving sustainable development.

We welcome the fact that the agreement contains a modern Trade and Sustainable Development Chapter, in line with the latest practices. This provides a good basis to monitor closely the implementation of the sustainability commitments which will be crucial to addressing concerns by certain politicians and civil society. To this end, the agreement has clear commitments on labour rights, the Paris Climate agreement and tackling deforestation. This means that the parties can be held accountable for their commitments to protecting workers and the environment.

Next Steps

The agreement will now be sent to the EU’s Legal Service for legal scrubbing to iron out any ambiguous language. Once this is completed, the text will be sent to the Council of the EU and the European Parliament for entry into force.

Considering that there are many steps in the process to be concluded, the expected entry into force is not before Q4 2020. This means that it will take more time until companies can start to benefit from the abolished or reduced tariffs.

 

 

 

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